Lower demand may quash shipping rates: experts

By Amy Su / Staff reporter

Mon, Sep 02, 2013 - Page 13

Global container shippers may find it challenging to raise freight rates this month because of oversupply problems caused by slow seasonal demand this quarter, according to reports issued by brokerage houses.

Major container shipping companies in Taiwan, including Evergreen Marine Corp (長榮海運) and Wan Hai Lines Ltd (萬海航運), have announced their rate hike programs, or rate restoration plans, which took effect yesterday.

Evergreen Marine, the owner of the nation’s largest container shipper fleet, is set to hike rates for its Far East and Indian subcontinent to Europe and the Mediterranean region by US$450 per twenty-foot equivalent unit (TEU), or by US$900 per forty-foot equivalent unit (FEU).

Wan Hai, meanwhile, unveiled a price increase plan on all dry cargoes originated from Asia, by US$300 per TEU, or US$600 per FEU, for routes to Middle East and Pakistan, as well as by US$200 per TEU, or US$400 per FEU, for routes to India and Sri Lanka.

It marked the sixth consecutive price increases this year by major global container shippers.

Evergreen Marine president Anchor Chang (張正鏞) said the price hike reflected an uptrend in demand in the container shipping industry this quarter. Chang expected strong sentiment will last to next quarter.

OVERSUPPLY

“With expected oversupply in the shipping sector near term, it will be challenging to fully pass on the higher fuel costs unless the industry cuts more capacity,” JPMorgan analyst Corrine Png (方華婷) said in the report.

Capital Securities Corp (群益證券) shared JPMorgan’s views, saying freight rates in the container shipping industry may be less pressured next quarter, as the number of idling vessels remained relatively low, with the amount of new capacity added in the second half of this year also higher than the first half.

That may make major container shippers in Taiwan see profitability in October-to-December period decline from three months ago — the traditional high season for the industry, Capital Securities said in its report.

However, SinoPac Securities Investment Service Co (永豐投顧) kept a more optimistic outlook for the container shipping industry.

CONTROLLING CAPACITY

Despite a low level of idling vessels, SinoPac Securities said major global container shippers have been indirectly controlling capacity by lowering speed and not operating extra services during the peak period.

In addition, the economic recovery in the US and Europe may help support the rate restoration program, SinoPac said in its report.

SinoPac Securities expects the three major container shipper in Taiwan — Evergreen Marine, Wan Hai and Yang Ming Marine Transport Corp (陽明海運) — to return to the black in the third quarter.

However, for the whole of this year, Yang Ming may still suffer a net loss of NT$2.66 billion (US$88.72 million) because of heavy losses made in the first half, SinoPac Securities forecast.

However, Evergreen Marine and Wan Hai would have a better chance to make profits for the entire year, the brokerage said.